There is a scary story being told around campfires and coffee shops about shadowy foreign investors, mainly from China, who are buying up all the housing in Seattle and Vancouver, B.C. and then leaving the housing vacant. This, the story goes, is why rents have been going up. As the problem spreads local media and even elected officials are mulling over what we should do. How do we stop this growing menace to our community? The money these investors want to “park” here in Seattle by emptying out our housing might be endless. Well, this scary story is just that, a scary story with no data to back it up. Let’s take a quick look at what’s behind this and how big of a problem it would have to be if it was a real thing.

Human beings have a powerful cultural response to threats to their well being. During the Cold War, Americans expressed and dealt with their fear in many ways, but horror films often, in retrospect, display the angst of the time. One film called Them! is a classic example. Something strange starts happening in New Mexico as locals are killed mysteriously. Then the menace is revealed: giant ants from underground. One of the characters, Dr. Harold Medford, figures it out:

Medford finally reveals his theory: a colony of giant ants, mutated by radiation from the first atomic bomb test near Alamogordo, is responsible for the killings.

You can see how the film, probably unintentionally, has engaged in a profound political and social critique of the Cold War. How did we get into this awful situation of two sides poised on annihilating each other? We did it by irresponsibly splitting the atom and using it as a weapon. Now the menace and fears of extermination from forces outside our control is spreading.

Today in Seattle, Drs Harold and Pat Medford are being played by Charles Mudede and Cary Moon who wrote an extended series of posts in The Stranger about Them!

This flow of Chinese money is looking for the next housing market, and it appears that Seattle and California cities are emerging targets. According to The Guardian, it is underway now. “Geographically, Chinese buyers are concentrated in the most expensive markets: New York, Los Angeles, San Francisco and Seattle.”

Run for the hills! Or better, pass a foreign investors tax on all real estate transactions. Any foreign buyer should have to pay some kind of penalty and be required to rent out their purchases affordably. That will send this menace to its destruction! Load up the Socialist Policy Cannon. Fire! Ready! Aim!

All this would be risible if it weren’t for the fact that it’s catching on. There was a story in the Seattle Times about the Chinese buying up single-family homes. And last week I heard from another reporter asking me if I’d have an issue with a foreign investor tax.

My response, issued with audible eye-rolls, was first, it isn’t happening. There is simply no evidence that there are billions of dollars in cash being dumped into our housing economy from abroad. Even Mudede and Moon don’t give any solid evidence. We can’t even define and measure what “displacement” or “gentrification” are, and those are things that are in common currency in the housing debate even though their value is set by a kind of intellectual barter economy. People pass those words around not knowing what they mean, but knowing how to use them to reenforce the conclusions they’ve already reach. Now along with those code words for socializing the housing economy we can add “foreign investors.”

Second, I said, even if there were a cabal of foreign billionaires wanting to buy up local housing, why on God’s Green Earth would they leave it vacant. One real estate broker I talked to who does big deals with lots of big buyers told me this whole story is a farcical.

It’s not happening, and to the extent that there is foreign money in town, it’s buying buildings and operating them, not leaving them empty. These people didn’t become rich by being stupid.

Exactly. But let’s say this forming menace is gathering above our city, poised to annihilate us and our way of life. Just how much housing would the billionaires have to buy, empty out, and let sit vacant before it would actually have a impact on the price everyone else pays for housing? I asked an expert, Mike Scott of Dupree + Scott.

Based on the relationship between rent and vacancy over the past 17 years, a 1/2% drop in the vacancy rate appears to push rents up 1.0%. So, with about 280,000 units in 20-unit and larger market rate apartments in the region, you would have to demolish (or vacate) 1,400 apartment units to create that rent increase. However, there are a lot of other factors to consider – primarily that the region added over 10,000 new units last year and again this year with even more to be added in each of the next 4+ years. Then there are issues of income levels, demographics, and more that will impact the result.

So for Them! to be able to push up everyone’s average rents up by 1 percent, the menacing foreign investors would have to acquire, empty out, and let sit about 1,400 rental units. Yes, 1,400! To give you a sense of the scale of this kind of purchase, based on participants in the City’s Multifamily Tax Exemption program, Them! would have to buy and empty out the Lyric and Joule apartment buildings on Capitol Hill, the Stackhouse in South Lake Union and the Thornton Creek building in Northgate just to get to about 1000 units.

Why would anyone in their right mind do that? What could possibly justify the time and energy of “parking” cash in empty real estate on such a scale? Who cares, it’s a great story! And evil knows now bounds.

Humans do very weird things when confronted with dissonance in their economy and culture. During the Cold War we looked at ourselves and realized that we had become, as J. Robert Oppenheimer put it quoting Hindu scripture, “Death, the destroyer of worlds.” The truth of nuclear weapons was scary enough, but if we did what was truly indicated, stop making such horrible weapons, we’d expose ourselves to the threat of them being used on us by our enemies. We coped by telling scary stories about giant mutated ants crawling out of the ground and slowly exterminating us. It’s called catharsis.

Now I’m no Jungian cultural social psychologist. But I’ve looked under the bed, and no, there are no foreign investors buying up all the housing in Seattle and leaving it empty. Yes, I checked the closet too. What is true, and truly horrific, is that we are not building enough housing and we’re spending time on wild stories of foreign investors buying up everything;this is a distraction from the urgency of solving the real problem. While we waste time scaring ourselves, real people are suffering from housing scarcity.

Don’t be surprised to see our own City Council, like the panicked officials in the 1950s horror films, slapping their heads and pointing at maps and charts and graphs and passing a foreign investment tax instead of loosing the pent up productivity that could meet housing demand. So instead of stories of evil foreign investors or radioactive ants, let us consider the bees and the vines instead:

THEN leave Complaints: Fools only strive
To make a Great an honest Hive.
T’enjoy the World’s Conveniencies,
Be famed in War, yet live in Ease
Without great Vices, is a vain
Eutopia seated in the Brain.
Fraud, Luxury, and Pride must live;
Whilst we the Benefits receive.
Hunger’s a dreadful Plague no doubt,
Yet who digests or thrives without?
Do we not owe the Growth of Wine
To the dry, crooked, shabby Vine?
Which, whist its shutes neglected stood,
Choak’d other Plants, and ran to Wood;
But blest us with his Noble Fruit;
As soon as it was tied, and cut:
So Vice is beneficial found,
When it’s by Justice lopt and bound;
Nay, where the People would be great,
As necessary to the State,
At Hunger is to make ’em eat.
Bare Vertue can’t make Nations live
In Splendour; they, that would revive
A Golden Age, must be as free,
For Acorns, as for Honesty.

From The Grumbling Hive, by Bernard Mandeville, 1705